September 22, 2008

What Would The Greatest Thinkers Think of the Financial Crisis?

What would Lau-tzu say about lending practices? Would Confucius use a credit card? Would Michel de Montaigne listen to Jim Cramer? What would Shakespeare say about spending? And what would Ayn Rand say about government bail outs?

"The reading of all good books is indeed like a conversation with the noblest men of past centuries who were the authors of them, nay a carefully studied conversation, in which they reveal to us none but the best of their thoughts." ~ Rene Descartes

Human behavior has not changed in three-thousand years or perhaps, if at all, in the history of mankind. The perspective I receive from reading the thoughts of the greatest thinkers who lived dozens, hundreds or even thousands of years ago is amazing. If humans behaved the same in 600 BC as they do now, what makes us think it will ever be different -- or if the way we act will ever change?

Reading the thoughts of the greatest thinkers reminds us that human behavior never really changes -- only the circumstances and settings change -- and provides insights into how we may affect our own behavior in light of the predictability of that of others. Our only control is of our own thoughts, desires and emotions -- and even that control is limited to the degree of our self-awareness and emotional intelligence...

"Government 'help' to business is just as disastrous as government persecution... the only way a government can be of service to national prosperity is by keeping its hands off." ~ Ayn Rand

Much of where we are today in the financial crisis is the doing of the federal government. Of course, no one twisted the arms of consumers or forced them beyond their will to buy homes, cars, clothes and self-indulgence, but the federal government certainly made it more possible. Historically low interest rates and an arguably over-friendly business environment gave complacency and greed just enough room and energy to manifest into the monster it inevitably would become...

And now that same government will "save us" from the monster it fed, nourished and unleashed...

"You have power over your mind -- not outside events. Realize this, and you will find strength." ~ Marcus Aurelius

If the federal government bails out financial firms with $1 trillion of our tax dollars, what control do we have over this? Of course, we may cast votes to elect our government representatives but those in office now are those who will make the decisions now -- not those for whom we cast votes in the next election or elections to follow.

What may we control? Our thoughts, our emotions, our desires, our asset allocation, our attention allocation, our investment selection, our actions and our passivity are all within our control to some degree. The actions, or lack thereof, of others and entities outside of ourselves are not within our control. How we prepare for, or how we react to, outside events is where our strength will be established and determined.

"He who establishes his argument by noise and command shows that his reason is weak." ~ Michel de Montaigne

What would Montaigne say about Jim Cramer or any talking head that essentially sells ad time and books with noise? Their "reason is weak" and their purpose is not founded upon altruism; therefore, we should be careful of frantically searching for answers in the media.

If anything, we could look to the noisemakers as examples of how not to actand as a proxy for the extremes of foolish behavior in financial markets and the world beyond. In fact, the precise opposite actions and reactions of the noisemakers have proven to be prudent more times than not.

"Have more than thou showest, speak less than thou knowest." ~ William Shakespeare

The current financial crisis is a result of behavior completely opposite to these famous words from Shakespeare. In western culture, we have both the desire and the capacity to buy now and pay later -- we wish to show more than we possess -- our display of material wealth is actually a display of our credit capacity and our desire is stronger than our will. Because we can buy it now, we do buy it now, with little consideration of consequences. This display is not one of financial power -- it is a display of our borrowing power -- and the lack of power over ourselves.

"Freedom from the desire for the answer is essential to the understanding of a problem." ~Jiddu Krishnamurti

What happens now? Where will this financial crisis lead us? Is the worst behind us or is the worst ahead of us? These questions in themselves are distractions from solutions to the problem.

We always look for answers from other people -- from other sources outside of ourselves. If we stop asking questions, the silence itself allows us to listen to the real source of answers -- that which is within ourselves.

"Wealth and rank are what people desire, but unless they are obtained in the right way they may not be possessed." ~ Confucius

Our society has become a status and debt society. If we may not possess wealth and rank then we will borrow it to inflate our egos and our economies until they become too large to contain.

I do believe that "wealth and rank" may be achieved in "the right way." Of course there are examples to the contrary but those who begin with a passion for something other than money, then money often follows that passion; and when our altruism inspires us to give away money, it often attracts more money -- not because of the love of money -- but because of the pursuit of a passion other than money.

"There is no calamity greater than lavish desires. There is not greater guilt than discontent. And there is no greater disaster than greed."~ Lau-tzu

The cycle of greed is coming to an end. Of course, the end of this cycle will not mark the end of greed -- it will only mark the end of this particular manifestation of greed.

Do you remember Enron? They were the ultimate symbol of the particular form of greed and hubris that ended the last market cycle. This market cycle's poster children will likely be Bear Stearns, Lehman Brothers, and AIG -- or perhaps others loom...

"I tell you that virtue does not come from money but from virtue comes money and every other good of man." ~ Socrates

This quote contains the core of my financial philosophy: Money does not bring meaning -- it brings short-term rewards, which is a human and flawed pursuit. The path to a meaningful existence is not the path of least resistance -- the shortest distance between two points is not necessarily a straight line...

It's been said thousands of times in thousands of different ways but the truth remains that our life is a journey and our fulfillment, meaning, actualization, or whatever word you want to attach to the true source of our well-being, is about the journey itself -- it is not about the destination -- if there even is a destination.

If we pursue meaning in our lives, money may follow. If money does not follow, it will not matter because we are already "rich" -- we find contentment in our pursuits -- and what happens outside of our control is just a production of the natural course of things.

I would say something contrary to spur conversation, but that would be silly because I absolutely agree with your sentiments.

It's interesting to see that viewership of the cable financial channels is now spiking up (as is usually the case when matters of finance become front page news for an extended period of time).

This is ironic and sad since, as you pointed out, this is one medium where many of the loudest talking heads and Wall Street/government shills have held court. People are looking to the media for information, but mostly what they will get (before and after the fact) is really obnoxious "entertainment" or misinformation.

A few days ago, I was considering the difference between Jesus' parable about the talents and his clearing out the money changers from the temple.

In the first case, the person is making an investment that brings that betters the society he or she lives in. In the second case, the money-changers are making an investment that solely profits themselves.

The 700 billion ransom note that the money changers have just written should not be met. We shouldn't negotiate with terrorists.

Great thoughts, happiness of the mind cannot be attained through possessions alone but without ‘worldly possessions’ life is not that trouble-free. Untended bellies of poor starved members of mankind in Sudan and Somalia attests to this.

It is up to the human mind to strike a balance between its demands and essential needs.

Body and soul both have contradictory demands, body has unquenchable hunger for more and soul can only be pleased through inner balance. We have a challenge that all of us ought to explore for a superior purpose so as to achieve true peace within.

We must look for a middle ground between these two opposite demands of body and soul to find true happiness. When ‘contentment’ leaves a person’s souls nothing seems to work. To be prosperous and to be cheerful is a skill, that skill can well be achieved by living well below our standards and efforts to be happy within by not losing sight of little pleasures of life.

However these are measly words, most of us regrettably concede to ‘celebrities’ enjoy live of ‘rich and famous’ and want to be a part of greater elite, this flight to new heights burn our wings more often than not, the determination of being an Icarus have to be curtailed, the enemy is within us, we are robbers of our own peace.

@David: Why not say something contrary? It only sharpens our thought and brings us closer to the truth, similar to Socrates and Plato's dialectic logic!

Regarding the media noise, the only clients of mine who have questioned their asset allocation are those who watch cable news during the day...

@Ned: I agree with your sentiment. Unfortunately, however, we, as citizens, do not have the "authority" to negotiate... We may only control what is within our control...

@Iqbal: Thank-you, as always, for your greate eastern perspective. The US is displaying to the world the true peril of non-contentment and greed. I will add that these events, in themselves, are physical world events. As individuals, we may still enable our own "peace within," as you say...

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